Keep eye on endowments, higher ed told

Legislative auditors are telling the state's System of Higher Education to keep a better eye on how Utah's 10 public colleges and universities invest the endowment money they've built up over the years.

Some institutions are having trouble tracking their investments, according to a legislative audit released Tuesday. With more than $600 million invested in endowment funds in the state, auditors say "strong oversight and controls seem particularly prudent."

Noncompliance with Utah's Uniform Management of Institutional Funds Act, they worry, could result in lost money — as it has in the past, which prompted the creation of such governance and a move from the former Money Management Act in 2005.

Endowment funds are privately donated, permanent funds that are meant to remain for the life of the institution. Only a portion of an endowment fund's annual increase is available to be spent on such things as scholarships, specific academic programs or to fund other university needs. The switch to UMIFA was primarily to allow schools to make long-term investments and get the accompanying returns.

All five of the institutions audited showed some degree of investment policy noncompliance during fiscal year 2006. In order to prevent potential losses and better protect endowment funds, the report cites several weaknesses that need to be corrected.

According to the report, management at the five schools did not properly track their endowment funds in strict accordance with investment rules. When auditors asked institutional management about their tracking habits, some said it would be "too time-consuming and not feasible" to track their complicated portfolios.

Other problems were found in how schools invested their money.

Dixie State College held $2.8 million of their total $10 million of endowment funds in individual stocks and corporate bonds, not allowed under the regents' current policy. They also aren't tracking their entire portfolio but only how much is with each investment manager.

Southern Utah University also held several individual stocks but has since sold the shares.

Less than 1 percent of Utah State University's endowment funds were being held in long-term corporate bonds at the time of the audit. They have since chosen not to divest the bonds.